News

Legislature passes bill banning rescissions

September 05, 2010

Area(s) of Interest:

The California Legislature has passed CMA-sponsored legislation that will provide patients a vital safeguard to ensure that insurers comply with the federal ban on rescissions. The bill passed in a bipartisan vote and was sent to the governor's desk. The governor has until September 30 to act on it.

The insurance industry has made billions of dollars from its practice of rescission, unfairly canceling health insurance policies after patients get sick. This bill (AB 2470) will give teeth to the federal ban and means plans cannot act as judge and jury whenever they want to cancel a policy. The measure allows patients to appeal insurers' decisions to the Department of Managed Health Care or Department of Insurance. Until a state regulator rules on the appeal and determines whether the cancellation was legal, the patient retains his or her health insurance.

"This bill helps close the door, once and for all, on a reprehensible practice insurers have used for years to boost their profits at patients' expense," says CMA President Brennan Cassidy, M.D.

a 2009 congressional investigation concluded that three insurers used rescissions to systematically cancel more than 20,000 policies over five years, saving the companies $300 million in claims. Rescissions pull the rug out from under patients, ending their insurance coverage and saddling them with huge medical bills when they are at their most vulnerable.

CMA sought to outlaw the conduct since it first came to light, sponsoring bills each of the last three years. But while the governor refused to sign the legislation, Congress used the same legal standard advocated by CMA and put a provision in health care reform that prohibits policy cancellation unless the patient commits fraud or intentional misrepresentation.

For more information on this and other bills of interest to physicians, see CMA Issues.